The Balance Sheet of MT Co

question 56

Multiple Choice

The balance sheet of MT Co. shows current assets of $14,000, net fixed assets of $21,800, current liabilities of $4,300, long-term debt of $2,600, and equity of $28,900. The balance sheet of LF Inc. has current assets of $4,700, net fixed assets of $8,100, current liabilities of $2,200, long-term debt of $1,200, and equity of $9,400. The market value of LF's fixed assets is $14,100. MT purchases LF for $20,000 and raises the funds through an issue of long-term debt. What will be the value of the equity account on the post- merger balance sheet assuming the purchase accounting method is used?

• A) $29,600
• B) $33,600
• C) $28,900
• D) $39,600
• E) $43,000

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Definitions:

Ego

The largely conscious, “executive” part of personality that, according to Freud, mediates among the demands of the id, superego, and reality. The ego operates on the reality principle, satisfying the id’s desires in ways that will realistically bring pleasure rather than pain.

Temper Tantrum

An emotional outbreak, usually exhibited by children, characterized by crying, screaming, or aggressive behaviors in response to frustration or lack of control.

Id

Contains a reservoir of unconscious psychic energy that, according to Freud, strives to satisfy basic sexual and aggressive drives. The id operates on the pleasure principle, demanding immediate gratification.

Superego

In Freudian psychology, the part of the psyche that operates as a moral conscience.